U.S. hospitals and health systems are in poor shape financially after being hit hard by the COVID-19 pandemic and historic inflation.
With nine months of the year down, healthcare organizations are facing negative margins to finish the year, according to the latest National Hospital Flash Report from Kaufman Hall. The October update is consistent with previous hospital financial reports revealing financial struggles.
Hospital margins did see some slight recovery during August, improving by a median of 4.2 percentage points from the depths of last month. However, they remain down by a median of 2.1 percentage points from last year, the report found. The year-to-date operating margin index was -0.3% through August.
There was some other good news for hospitals and health system bottom lines in the report: volumes climbed as patients came back for elective procedures that were put off during the height of the pandemic. During August, operating room minutes increased 13.6% from July, length of stay dropped 2.1%, patient days rose 0.7% and emergency department visits rose 1.1%.
While higher patient volume helped boost revenue, hospitals still faced higher costs. Gross operating revenue rose 9.1% in August and was up 5.5% from a year ago. Outpatient revenue was up 10.9% from July and 10.6% year over year, while inpatient revenue rose 4.9% from July and 3.5% from a year prior.
Expenses took a swipe out of revenue, rising 3.3% from July to August alone, and rising 6% from August 2021. Labor costs were only a small part of higher overall expenses, rising 1.3% month over month. Overall expenses are up 8.9% year to date.
“Supplies and expensive drugs contributed to this uptick more than labor costs, which remain elevated,” the report noted.
Another big market factor impacting hospitals’ financials are new entrants chipping away at outpatient volume. As such, hospitals may need to rethink their long-term planning as more care is delivered in non-hospital settings.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."